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Business Organization
Business organization is the process which defines the roles within a company, their relationships and dependencies. General Concepts It’s vital for every business to be thoroughly organized, and in order for this organization to be effective, it must follow thow key principles: * The command unit, such as that every employee has only one direct command line, to avoid misunderstandings and errors. * An optimal number of direct subordinates has to be found, so that each leader is able to effectively coordinate the working group. It was found that the average number of subordinates for effective control is 7-8, with extremes from 3 to 15. Organizational Models Different organizational models of hierarchical nature are defined, in which there exist: * Subordination (a direct line of control); * Collaboration (the two subjects are on the same level); * Assistance (transversal roles not bound by the hierarchical structure of the company, only dependent on the CEO). The organizational structure is represented using a chart which represents the relationships between the subjects, known as organization chart. In particularly complex companies a simple hierarchical organization might not suffice. Because of this, more specialized models have been created: the Divisional model, the Functional model and the Matricial model. Functional Model The functional model is based on a division by the basic function of the company, that is, based on the different types of jobs. Following this model, the company is divided by the kind of jobs, ignoring the location of the company and what is produced by a certain group of people, focusing on the necessities of a single function. For instance, a structure based on the basic functions of the company, such as Production, Sales, ecc.is has a functional model. Pros and Cons It has some pros and some cons, depending on the nature of the examined company: * Pros: it allows for a simple and effective economy of scale, because it focuses the attention of the company on the single function allowing for large numbers of products; * Cons: it is not effective in extremely large companies, especially multinationals, or for companies that have a large number of projects. It is also usually not responsive to fast changes of the market. Divisional Model The divisional model is based on logical subdivisions of the company, such as by geographical areas, product families, projects, etc. Following this model, the company is divided by things such as geographical areas, product families, projects, etc. defined as divisions. An example of divisional model is a structure based on dividing the company on a logical level, by for example a family of products or geographical area. Pros and Cons It has some pros and some cons, depending on the nature of the examined company: * Pros: it allows for companies with diversified products and/or markets, as it allows to focus on precises goals; * Cons: it is not effective for an economy of scales, because the high degree of fragmentation often impedes fine rationalized control over each and every function across various divisions. Matricial Model This organizational structure combines aspects of the two previous models, making for a structure that divides both on projects or areas and functions. In this model the company is divided both by projects or areas and functions. Each employee or team is placed on the intersection of a division and a function. Pros and Cons It has some pros and some cons, depending on the nature of the examined company: * Pros: excellent for companies carrying out a large number of projects, allows for a specialised control both in the technical and economical side of the project; * Cons: controls might become ambiguous, that is, a team member depends on both his/her technical director and the project manager.